Kuehne + Nagel cuts full-year guidance after weak freight yields hit quarterly pro

Investing.com -- Kuehne + Nagel International AG on Thursday lowered its full-year earnings outlook by about 16% after weaker freight yields and currency pressures reduced profit in the third quarter.

The transport and logistics company now expects EBIT of more than CHF 1.3 billion, down from a previous range of CHF 1.45 billion to CHF 1.65 billion. 

Jefferies and consensus forecasts are CHF 1.37 billion and CHF 1.375 billion respectively, leaving the lower end of guidance about 5% above expectations.

Third-quarter EBIT fell 37% year over year to CHF 285 million, about 3% below consensus, while net turnover declined 7% to CHF 6 billion and gross profit dropped 4% to CHF 2.1 billion. 

The company’s conversion rate decreased to 13.5% from 20.8% in the prior year. Reported net income was CHF 194 million, down 40% from CHF 324 million a year earlier.

Sea Logistics recorded the steepest decline, with gross profit down 15% and EBIT lower by 57% as overcapacity and foreign exchange headwinds reduced yields by 14% year over year. 

Jefferies said sea EBIT margins fell to 4.1% from 8.6% in the prior year. “Overcapacity and FX headwinds hit yields (-10% QoQ, -14% YoY). Despite 1% lower unit costs, conversion fell to 24% from 47%, showing heavy margin compression,” Morgan Stanley said.

Air Logistics posted a 7% decline in gross profit and a 23% fall in EBIT, with yields slipping 13%. “Air grew volumes +7% YoY (flat sequentially), driven by semiconductors and cloud demand, though yields slipped -13% YoY,” Morgan Stanley said. 

Road Logistics grew gross profit 3% but EBIT fell 9%, while Contract Logistics recorded 2% growth in gross profit and a 9% rise in EBIT, Jefferies reported.

The company announced a CHF 200 million cost-saving program to be completed by the end of 2026, targeting CHF 110 million in staff costs, CHF 50 million in facilities and CHF 40 million in other savings. 

About CHF 50 million in one-off charges are expected in the fourth quarter of 2025 and first quarter of 2026. 

Morgan Stanley noted that “2024 cost cutting program halved from CHF200mn to CHF100mn,” and said the new plan “will likely want to see delivery of the new program before assuming improvements are sustainable.”

Free cash flow was CHF 226 million in the quarter, down from CHF 284 million a year earlier, bringing nine-month free cash flow to CHF 521 million, compared with CHF 312 million in the same period last year.

Kuehne + Nagel’s cash position will decline after Partners Group exercised a put option to sell its 24.9% stake in Apex for CHF 886 million. 

“KN cash on the balance sheet will be nil post the purchase (CHF603m as at end 3Q) which may mean KN issue debt,” Jefferies said.

Jefferies maintained a “hold” rating with a price target of CHF 165. Morgan Stanley rated the stock “underweight” with a price target of CHF 184.